(It is important to note that only one of the opinions, Deutsche Bank National Trust v. Brumbaugh, 2012 OK 3, has been approved for publication so far.)

These opinions hold that to commence a foreclosure action, the plaintiff must show that it has the right to enforce the promissory note, and in the absence of such showing, the plaintiff lacks standing to bring the lawsuit. The fact patterns in each of the cases vary slightly (seven are based on appeals from orders granting summary judgment entered by the trial court, and one is based upon a default judgment), but the basic fact pattern is as follows: Plaintiff files a foreclosure action either without attaching a copy of the promissory note or attaching the note without proper indorsement(s) by the original lender. Defendant raises the issue that Plaintiff does not have standing to sue, either in response to a Motion for Summary Judgment or by pleadings filed after the Journal Entry of Judgment. Motions are denied after Plaintiff provides documentation showing indorsement or allonge. Defendant appeals.

ON APPEAL FROM THE DISTRICT COURT OF TULSA COUNTYHONORABLE LINDA G. MORRISSEYDISTRICT JUDGE

¶0 The Plaintiff /Appellee, Deutsche Bank National Trust as Trustee for Long Beach Mortgage Loan 2002-1, filed this foreclosure action against the Defendant/Appellant, Dennis Brumbaugh. Plaintiff filed a motion for summary judgment which was granted by the trial court. Defendant contends there is not enough evidence to show Plaintiff has standing. Plaintiff asserts it is the holder of the note and has standing. We find there are material issues of fact that need to be determined and summary judgment is not appropriate.

¶1 This is an appeal from a foreclosure action initiated by Appellee, Deutsche Bank National Trust As Trustee for Long Beach Mortgage Loan 2002-1 (Appellee) against Appellant Dennis Brumbaugh (Appellant) and others. Appellant and his wife, Debra Brumbaugh, (Brumbaughs) executed a note and mortgage with Long Beach Mortgage Company on February 27, 2002. On December 27, 2006, the Brumbaughs entered into a loan modification agreement with U.S. Bank, N.A., successor trustee to Wachovia Bank, N.A. (formerly known as First Union National Bank), as Trustee for Long Beach Mortgage Loan Trust 2002-1, Asset Backed Certificates, Series 2002-1 in trust for the benefit of the Certificateholders. On July 20, 2007, the Brumbaughs divorced, and in 2008, Debra Brumbaugh executed a quitclaim deed to Dennis Brumbaugh.

¶2 Appellant defaulted on the note in January 2009, and Appellee filed its petition for foreclosure on June 2, 2009. Attached to the petition was a copy of the note, mortgage, loan modification agreement, and copies of statements of judgments and liens by other entities. Appellee claims it is the present holder of the note and mortgage having received due assignment through mesne assignments of record or conveyance via mortgage servicing transfer. The Appellant answered, denying Appellee owns any interest in the note and mortgage, and the copies attached to the petition were not the same as those he signed. He claims Appellee lacked capacity to sue and the trial court lacks jurisdiction over the subject matter. He also denied being in default and asserted the Appellee/servicing agent caused the alleged default.

¶3 On April 1, 2010, Appellee filed a motion for summary judgment. Attached to the motion was an affidavit from an employee of JP Morgan Chase Bank (Chase) as the servicing agent for Appellee. The affidavit states the Appellee is the current owner and holder of the original note, mortgage, and the modification agreements. However, there is no mention of when Appellee became the holder.

¶4 Appellant asserts in his response to the motion for summary judgment that Appellee failed to prove the affiant is a competent witness and no documentation was presented that connects Appellant to Appellee. The note attached to the petition and the motion did not show it had been negotiated to any other party including Appellee. Negotiation requires transfer of possession of the instrument and its indorsement by the holder. 12A O.S. 2001, § 3-201(b). He asserts because there is no indorsement whatsoever by Long Beach Mortgage Company attached to the petition and motion for summary judgment, Appellee cannot be the holder of the note. Therefore, Appellant asserts Appellee cannot be the real party in interest. However, in Appellee’s reply to Appellant’s response to the motion for summary judgment and at the hearing, a copy of the note with a blank, undated indorsement signed by Long Beach Mortgage Company was attached and presented.

¶5 Appellee asserts that even if negotiation of the note was at issue, Appellee has possession of the note and that satisfies the “negotiation” requirements of 12A O.S. 2001, § 3-201. Further, the Chase affiant has personal knowledge because he reviewed and examined the account files and Chase is the servicing agent for Appellee. Appellee further asserts, it has the original note and mortgage, and is therefore, the real party in interest.

¶6 The trial court reviewed the note presented at the hearing and agreed with Appellee that Appellee was the holder of the note because it had possession of the note and it was indorsed in blank. The court granted summary judgment in favor of Appellee on January 27, 2011.

STANDARDOF REVIEW

¶7 An appeal on summary judgment comes to this court as a de novo review. Carmichael v. Beller, 1996 OK 48, ¶2, 914 P.2d 1051, 1053. All inferences and conclusions are to be drawn from the underlying facts contained in the record and are to be considered in the light most favorable to the party opposing the summary judgment. Rose v. Sapulpa Rural Water Co., 1981 OK 85, 621 P.2d 752. Summary judgment is improper if, under the evidentiary materials, reasonable individuals could reach different factual conclusions. Gaines v. Comanche County Medical Hospital, 2006 OK 39, ¶4, 143 P.3d 203, 205.

ANALYSIS

¶8 The Uniform Commercial Code adopted in Oklahoma, 12A O.S. 2001, § 1-101 et seq., defines who is a “person entitled to enforce” the note (instrument).1 A “person entitled to enforce” the note requires possession of the note with a very limited exception.2 It will be either one who is a “holder” of the note or a “nonholder in possession of the note who has the rights of a holder.”3

¶9 Appellee must demonstrate it is a person entitled to enforce the note. It must provide evidence it has possession of the note either by being a holder or a nonholder in possession who has the rights of a holder. Appellee attached to its Reply to Defendant’s Response to Plaintiff’s Motion for Summary Judgment a copy of the note with a blank indorsement from Long Beach Mortgage Company. Appellee states this allonge4 was inadvertently omitted from the copy of the note that was attached to its Motion for Summary Judgment. However, this allonge was not attached to the Petition for Foreclosure of Mortgage. Appellee is trying to establish it is a “holder” of the note. Evidence establishing when Appellee became a person entitled to enforce the note must show Appellee was a person entitled to enforce the note prior to filing its cause of action for foreclosure.

¶10 Appellant argues Appellee does not have standing to bring this foreclosure action. The issue presented to this Court is standing. This Court has previously held:

Standing, as a jurisdictional question, may be correctly raised at any level of the judicial process or by the Court on its own motion. This Court has consistently held that standing to raise issues in a proceeding must be predicated on interest that is “direct, immediate and substantial.” Standing determines whether the person is the proper party to request adjudication of a certain issue and does not decide the issue itself. The key element is whether the party whose standing is challenged has sufficient interest or stake in the outcome.

Respondent challenges Petitioner’s standing to bring the tendered issue. Standing refers to a person’s legal right to seek relief in a judicial forum. It may be raised as an issue at any stage of the judicial process by any party or by the court sua sponte. (emphasis original)

Furthermore, in Fent v. Contingency Review Board, 2007 OK 27, footnote 19, 163 P.3d 512, 519, this Court stated “[s]tanding may be raised at any stage of the judicial process or by the court on its own motion.” Additionally in Fent, this Court stated:

Standing refers to a person’s legal right to seek relief in a judicial forum. The three threshold criteria of standing are (1) a legally protected interest which must have been injured in fact- i.e., suffered an injury which is actual, concrete and not conjectural in nature, (2) a causal nexus between the injury and the complained-of conduct, and (3) a likelihood, as opposed to mere speculation, that the injury is capable of being redressed by a favorable court decision. The doctrine of standing ensures a party has a personal stake in the outcome of a case and the parties are truly adverse.

¶11 To commence a foreclosure action in Oklahoma, a plaintiff must demonstrate it has a right to enforce the note and, absent a showing of ownership, the plaintiff lacks standing. Gill v. First Nat. Bank & Trust Co. of Oklahoma City, 1945 OK 181, 159 P.2d 717.5 Being a person entitled to enforce the note is an essential requirement to initiate a foreclosure lawsuit. In the present case, there is a question of fact as to when Appellee became a holder, and thus, a person entitled to enforce the note. Therefore, summary judgment is not appropriate. If Deutsche Bank became a person entitled to enforce the note as either a holder or nonholder in possession who has the rights of a holder after the foreclosure action was filed, then the case may be dismissed without prejudice and the action may be re-filed in the name of the proper party. We reverse the granting of summary judgment by the trial court and remand back for further determinations as to when Appellee acquired its interest in the note.

CONCLUSION

¶12 It is a fundamental precept of the law to expect a foreclosing party to actually be in possession of its claimed interest in the note, and have the proper supporting documentation in hand when filing suit, showing the history of the note, so the defendant is duly apprised of the rights of the plaintiff. This is accomplished by establishing that the party is a holder of the instrument or a nonholder in possession of the instrument who has the rights of a holder, or a person not in possession of the instrument who is entitled to enforce the instrument pursuant to 12A O.S. 2001, § 3-309 or 12A O.S. 2001, § 3-418. 12A O.S. 2001, § 3-301. Likewise, for the homeowners, absent adjudication on the underlying indebtedness, the dismissal cannot cancel their obligation arising from an authenticated note, or loan modification, or insulate them from foreclosure proceedings based on proven delinquency. See, U.S. Bank National Association v. Kimball 27 A.3d 1087, 75 UCC Rep.Serv.2d 100, 2011 VT 81 (VT 2011); and Indymac Bank, F.S.B. v. Yano-Horoski, 78 A.D.3d 895, 912 N.Y.S.2d 239 (2010).

2 A person who is not reasonably able to obtain possession of the note because it was lost, destroyed, in the wrongful possession of another, or it is paid or accepted by mistake. 12A O.S. 2001, § 3-301.

3 A holder is a person in possession of the note that is payable either to bearer (blank indorsement) or to an identified person (special indorsement) that is the person in possession. 12A O.S. 2001, §§ 1-201(b)(21), 3-204 and 3-205. A “nonholder in possession who has the rights of a holder” is a person in possession of the note but the note was not indorsed by the previous holder; special indorsement or blank indorsement. No negotiation has occurred because the person now in possession did not become a holder by lack of the note being indorsed as mentioned. An example would be when a sale of notes in bulk is made by the holder to a transferee and the holder is transferring the right to enforce the notes even though there has been no negotiation. (See the REPORT OF THE PERMANENT EDITORIAL BOARD FOR THE UNIFORM COMMERCIAL CODE, APPLICATION OF THE UNIFORM COMMERCIAL CODE TO SELECTED ISSUES RELATING TO MORTGAGE NOTES (NOVEMBER 14, 2011)). Negotiation is the voluntary or involuntary transfer of an instrument by a person other than the issuer to a person who thereby becomes its holder. 12A O.S. 2001, § 3-201. Transfer occurs when the instrument is delivered by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument. 12A O.S. 2001, § 3-203. Delivery of the note would still have to occur even though there is no negotiation. Delivery is defined as the voluntary transfer of possession. 12A O.S. 2001, § 1-201(b)(15). The transferee would then be vested with any right of the transferor to enforce the note. 12A O.S. 2001, § 3-203(b). Some jurisdictions have held that without holder status and therefore the presumption of a right to enforce, the possessor of the note must demonstrate both the fact of the delivery and the purpose of the delivery of the note to the transferee in order to qualify as the person entitled to enforce. In re Veal, 450 B.R. 897, 912 (B.A.P. 9th Cir. 2011).

4According to Black’s Law Dictionary (9th ed. 2009) an allonge is “[a] slip of paper sometimes attached to a negotiable instrument for the purpose of receiving further indorsements when the original paper is filled with indorsements.” See, 12A O.S. 2001, § 3-204(a).

5 This opinion occurred prior to the enactment of the UCC and as explained in footnote 3 of this opinion, the person entitled to enforce the note in almost all situations is required to be in possession of the note and therefore if the owner of the note is not in possession of the note it is not a person entitled to enforce the note. (See the REPORT OF THE PERMANENT EDITORIAL BOARD FOR THE UNIFORM COMMERCIAL CODE, APPLICATION OF THE UNIFORM COMMERCIAL CODE TO SELECTED ISSUES RELATING TO MORTGAGE NOTES (NOVEMBER 14, 2011)).

NOTICE: THIS OPINION HAS NOT BEEN RELEASED FOR PUBLICATION IN THE PERMANENT LAW REPORTS. UNTIL RELEASED, IT IS SUBJECT TO REVISION OR WITHDRAWAL.

DEUTSCHE BANK NATIONAL TRUST COMPANY, AS TRUSTEE IN TRUST FOR THE BENEFIT OF THE CERTIFICATE HOLDERS FOR ARGENT SECURITIES INC., ASSET-BACKED PASS THROUGH CERTIFICATES, SERIES 2006-W2, Plaintiff/Appellee,

v.

JEVESTER BYRAMS, JR. and NATACHA BYRAMS, ET AL Defendant/Appellant,

ON APPEAL FROM THE DISTRICT COURT OF CREEK COUNTYHONORABLE LAWRENCE W. PARISHDISTRICT JUDGE

¶0 Appeal of a summary judgment granted in Deutsche Bank National Trust Company’s favor against the Byramses on May 11, 2010. The Byramses filed a petition and motion to vacate, as well as, requests to stay any proceedings regarding the property. The parties appeared before the trial court on June 15, 2010, and the petition, motion and other requests were denied. The order was filed on July 6, 2010. The Byrams appealed on July 28, 2010, and this Court retained the matter on April 21, 2011.

¶1 In a petition filed on December 8, 2009, Deutsche Bank National Trust company, as Trustee in Trust for the benefit of the Certificate Holders for Argent Securities Inc., Asset-Backed Pass-Through Certificates, Series 2006-W2,claiming to be the present holder of the note (hereinafter Deutsche Bank) filed a foreclosure action against the Byramses. Deutsche Bank claimed at that time to hold the note and mortgage having received due assignment through mesne assignments of record or conveyance via mortgage servicing transfer. A review of the note shows no indorsement. Argent Mortgage Company, LLC, was the original lender. In its brief in support of motion for summary judgment, filed March 9, 2010, Deutsche Bank attached a document entitled “Assignment of Mortgage.” This assignment of mortgage was acknowledged on January 12, 2010, and stamped as being recorded with the County Clerk of Tulsa County on January 26, 2010. This was over one month after the filing of the foreclosure proceeding (December 8, 2009). Additionally, this Assignment of Mortgage, from Argent Mortgage Company, LLC, by Citi Residential Lending, Inc., made to plaintiff, Deutsche Bank as the trustee of Argent Mortgage Company, LLC, was signed by Citi Residential Lending, Inc. Both the assignor and assignee list the same address, “c/oAmerican Home Mtg Servicing, Inc. 1525 S. Beltline Rd, Coppell, TX 75019.” A summary judgment granted in Deutsche Bank’s favor against the Byrams on May 11, 2010, memorialized a final journal entry of judgment order. A petition for new trial to vacate the final journal entry of judgment, and motion to dismiss plaintiff’s petition for lack of standing was filed on May 21, 2010, which was denied by order on June 28, 2010, by the trial court. The Byrams appeal this summary judgment arguing Deutsche Bank National Trust Company failed to demonstrate standing.

STANDARD OF REVIEW

¶2 An appeal on summary judgment comes to this court as a de novo review. Carmichael v. Beller, 1996 OK 48, ¶2, 914 P.2d 1051, 1053. All inferences and conclusions are to be drawn from the underlying facts contained in the record and are to be considered in the light most favorable to the party opposing the summary judgment. Rose v. Sapulpa Rural Water Co., 1981 OK 85, 631 P.2d 752. Summary judgment is improper if, under the evidentiary materials, reasonable individuals could reach different factual conclusions. Gaines v. Comanche County Medical Hospital, 2006 OK 39, ¶4, 143 P.3d 203, 205.

ANALYSIS

¶3 Appellant argues Appellee does not have standing to bring this foreclosure action. Although Appellee has argued it holds the note, there is no evidence in the record supporting it is a holder of the note. The face of the note does not indicate it was indorsed and the purported “assignment of mortgage” was filed after the filing of the foreclosure proceedings.

¶4 The issue presented to this Court is standing. This Court has previously held:

Standing, as a jurisdictional question, may be correctly raised at any level of the judicial process or by the Court on its own motion. This Court has consistently held that standing to raise issues in a proceeding must be predicated on interest that is “direct, immediate and substantial.” Standing determines whether the person is the proper party to request adjudication of a certain issue and does not decide the issue itself. The key element is whether the party whose standing is challenged has sufficient interest or stake in the outcome.

Respondent challenges Petitioner’s standing to bring the tendered issue. Standing refers to a person’s legal right to seek relief in a judicial forum. It may be raised as an issue at any stage of the judicial process by any party or by the court sua sponte. (emphasis original)

Furthermore, in Fent v. Contingency Review Board, 2007 OK 27, footnote 19, 163 P.3d 512, 519, this Court stated “[s]tanding may be raised at any stage of the judicial process or by the court on its own motion.” Additionally in Fent, this Court stated:

Standing refers to a person’s legal right to seek relief in a judicial forum. The three threshold criteria of standing are (1) a legally protected interest which must have been injured in fact- i.e., suffered an injury which is actual, concrete and not conjectural in nature, (2) a causal nexus between the injury and the complained-of conduct, and (3) a likelihood, as opposed to mere speculation, that the injury is capable of being redressed by a favorable court decision. The doctrine of standing ensures a party has a personal stake in the outcome of a case and the parties are truly adverse.

¶5 To commence a foreclosure action in Oklahoma, a plaintiff must demonstrate it has a right to enforce the note and, absent a showing of ownership, the plaintiff lacks standing. Gill v. First Nat. Bank & Trust Co. of Oklahoma City, 1945 OK 181, 159 P.2d 717.1 An assignment of the mortgage, however, is of no consequence because under Oklahoma law, “[p]roof of ownership of the note carried with it ownership of the mortgage security.” Engle v. Federal Nat. Mortg. Ass’n, 1956 OK 176, ¶7, 300 P.2d 997, 999. Therefore, in Oklahoma it is not possible to bifurcate the security interest from the note.” BAC Home Loans Servicing, L.P. v. White, 2011 OK CIV APP 35, ¶ 10, 256 P.3d 1014, 1017. Because the note is a negotiable instrument, it is subject to the requirements of the UCC. Thus, a foreclosing entity has the burden of proving it is a “person entitled to enforce an instrument” by showing it was “(i) the holder of the instrument, (ii) a nonholder in possession of the instrument who has the rights of a holder, or (iii) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to Section 12A-3-309 or subsection (d) of Section 12A-3-418 of this title.” 12A O.S. 2001 §3-301.

¶6 To show you are the “holder” of the note you must prove you are in possession of the note and the note is either “payable to bearer” (blank indorsement) or to an identified person that is the person in possession (special indorsement).2 Therefore, both possession of the note and an indorsement on the note or attached allonge3 are required in order for one to be a “holder” of the note.

¶7 To be a “nonholder in possession who has the rights of a holder” you must be in possession of a note that has not been indorsed either by special indorsement or blank indorsement. The record in this case reflects the note has not been indorsed. No negotiation has occurred because the person now in possession did not become a holder by lack of the note being indorsed as mentioned. Negotiation is the voluntary or involuntary transfer of an instrument by a person other than the issuer to a person who thereby becomes its holder. 12A O.S. 2001, § 3-201. Transfer occurs when the instrument is delivered by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument. 12A O.S. 2001, § 3-203. Delivery of the note would still have to occur even though there is no negotiation. Delivery is defined as the voluntary transfer of possession. 12A O.S. 2001, § 1-201(b)(15). The transferee would then be vested with any right of the transferor to enforce the note. 12A O.S. 2001, 3-203(b). Some jurisdictions have held that without holder status and therefore the presumption of a right to enforce, the possessor of the note must demonstrate both the fact of the delivery and the purpose of the delivery of the note to the transferee in order to qualify as the person entitled to enforce. In re Veal, 450 B.R. 897, 912 (B.A.P. 9th Cir. 2011). See also, 12A O.S. 2001, § 3-203.

¶8 In the present case, Appellee has only presented evidence of an unindorsed note and an “Assignment of Mortgage.” Without an indorsement on the note the Appellee cannot be a holder of the note. Therefore, from the record presented to this Court, the Appellee must assert it is a nonholder in possession who has the rights of a holder.

¶9 The assignment of a mortgage is not the same as an assignment of the note. If a person is trying to establish it is a nonholder in possession who has the rights of a holder it must bear the burden of establishing its status as a nonholder in possession with the rights of a holder. Appellee must establish delivery of the note as well as the purpose of that delivery. In the present case, it appears Appellee is trying to use the assignment of mortgage in order to establish the purpose of delivery. The assignment of mortgage purports to transfer “the following described mortgage, securing the payment of a certain promissory note(s) for the sum listed below, together with all rights therein and thereto, all liens created or secured thereby, all obligations therein described, the money due and to become due thereon with interest, and all rights accrued or to accrue under such mortgage.” This language has been determined by other jurisdictions to not effect an assignment of a note but to be useful only in identifying the mortgage. Therefore, this language is neither proof of transfer of the note nor proof of the purpose of any alleged transfer. See, In re Veal, 450 B.R. 897, 905 (B.A.P. 9th Cir. 2011).

¶10 Appellee must show it became a “person entitled to enforce” prior to the filing of the foreclosure proceeding. In the present case, there is a question of fact as to when and if this occurred and summary judgment is not appropriate. Therefore, we reverse the granting of summary judgment by the trial court and remand back for further determinations. If Deutsche Bank became a person entitled to enforce the note as either a holder or nonholder in possession who has the rights of a holder after the foreclosure action was filed, then the case may be dismissed without prejudice and the action may be re-filed in the name of the proper party.

CONCLUSION

¶11 It is a fundamental precept of the law to expect a foreclosing party to actually be in possession of its claimed interest in the note, and have the proper supporting documentation in hand when filing suit, showing the history of the note, so that the defendant is duly apprised of the rights of the plaintiff. This is accomplished by showing the party is a holder of the instrument or a nonholder in possession of the instrument who has the rights of a holder, or a person not in possession of the instrument who is entitled to enforce the instrument pursuant to 12A O.S. 2001, § 3-309 or 12A O.S. 2001, § 3-418. Likewise, for the homeowners, absent adjudication on the underlying indebtedness, the dismissal cannot cancel their obligation arising from an authenticated note, or insulate them from foreclosure proceedings based on proven delinquency. See, U.S. Bank National Association v. Kimball 27 A.3d 1087, 75 UCC Rep.Serv.2d 100, 2011 VT 81 (VT 2011); and Indymac Bank, F.S.B. v. Yano-Horoski, 78 A.D.3d 895, 912 N.Y.S.2d 239 (2010).

1 This opinion occurred prior to the enactment of the UCC. It is, however, possible for the owner of the note not to be the person entitled to enforce the note if the owner is not in possession of the note. (See the REPORT OF THE PERMANENT EDITORIAL BOARD FOR THE UNIFORM COMMERCIAL CODE, APPLICATION OF THE UNIFORM COMMERCIAL CODE TO SELECTED ISSUES RELATING TO MORTGAGE NOTES (NOVEMBER 14, 2011)).

2 12A O.S. 2001, §§ 1-201(b)(21), 3-204 and 3-205.

3 According to Black’s Law Dictionary (9th ed. 2009) an allonge is “[a] slip of paper sometimes attached to a negotiable instrument for the purpose of receiving further indorsements when the original paper is filled with indorsements.” See, 12A O.S. 2001, § 3-204(a).

2. Thus, at the time the CWC acquisition closed in July 2008, BAC management and its Board had a full understanding of the potential liabilities which might arise in the future. Rather than coming clean, or resolving the CWC issues, BAC management and the Board adopted a wrongful and obstinate policy: refusing to cooperate with government regulators investigating the Company’s mortgage foreclosure practices; obtaining reimbursement on government guaranteed mortgages which were likely violative of the False Claims Act; failing to comply with an Arizona Consent Decree requiring that BAC fairly entertain mortgage modifications; engaging in massive “Robo-Signing” of foreclosure documents; agreeing to cease Robo-Signing, but then resuming Robo-Signing despite its questionable legality. (“Robo Signing” is the bulk execution of foreclosure-related documents without actual review for accuracy and adequacy).

[…]

4. The BAC Board knew that BAC was legally obligated to proceed with legacy mortgage foreclosures in a prudent lawful manner. This did not occur. Rather, the Board wholly failed to rein in management. On the contrary, it let management engage in blatantly unlawful excesses as outlined above and as discussed in detail below. The BAC Board is composed of banking, finance and business professionals who fully understand the issues facing BAC, and who fully appreciate why its response need to be lawful and transparent. Nonetheless, the Board ignored numerous c1ear-as-day reports of irregularity bordering on fraud, and allowed the Company to get drawn in to additional illegality, materially raising BAC’s potential liability. As a result, the BAC Board breached its fiduciary duty and should be held liable to BAC for the harm it has caused.

1. Did the borrower have a choice or was he/she coerced into accepting MERS, who they really had no idea of what or who it was?

2. Was it ever disclosed that many of the lenders are shareholders of MERS, also who may own the first or second position… this includes Fannie Mae who is a shareholder?

3. Since Fannie (GSE) is owned by “taxpayers” why is she acting 100% private – 100% of the time?

4. One may have been coerced into having MERS in their documents but one would never accept forgery or robo-signing because everyone knows this would be fraud and therefore void the transaction…like a check.

With mounting evidence of robo-signing and other alleged fraud perpetrated by banks, foreclosure law firms and others, Fannie Mae and Flagstar Bank have filed a new defense of such actions in Ingham County Circuit Court — and Ingham County Register of Deeds Curtis Hertel, Jr. is crying foul.

“What they are basically saying is they can forge an assignment and there is nothing the citizen or court can do about it. It is a brazen attempt to legalize robosigning,” says Hertel. “It’s just another example of Fannie Mae thumbing its nose at the American people, and unfortunately while they are under federal bailout we are paying for it.”

This is happening in the case of a Haslett man who suffered a stroke and fell behind on his mortgage payments. As a result, Flagstar Bank and Fannie Mae foreclosed on him and are now in the final stages of evicting him from his Haslett home, says Hertel.

MEMORANDUM OF DECISION

I. INTRODUCTION The matters before the Court are the Second Amended Complaint (the “Complaint”) filed by Douglas Cromwell, Jr., and Mary Cromwell (collectively, the “Debtors”) against Countrywide Home Loans, Inc. (“Countrywide”) and Mortgage Electronic Registration Systems, Inc. (“MERS”) (jointly, the “Defendants”) alleging violations of the Massachusetts Consumer Credit Cost Disclosure Act1 (the “CCCDA”), as well as the Debtors’ Objection to Proof of Claim filed by Countrywide Home Loans, Inc. (the “Objection to Claim”) and the Objection to Confirmation of Second Amended Chapter 13 Plan (the “Objection to Confirmation”) filed by Countrywide. Through their Complaint, the Debtors seek, inter alia, rescission of a refinancing transaction and a declaration that the mortgage granted by them to MERS, as nominee for Countrywide, is void and that they have no tender obligation as a condition to effectuate the rescission.2 In the Objection to Claim, they, in turn, contend that Countrywide’s claim is now unsecured in light of the Debtors’ purported rescission. The Defendants dispute the Debtors’ allegations in the Complaint and object to the Debtors’ Chapter 13 plan on the basis that they propose to treat Countrywide’s claim as unsecured. For the reasons set forth below, I will enter judgment in favor of the Debtors and order them to file a fee application within thirty days, sustain the Objection to Claim, and overrule the Objection to Confirmation.3

FOR IMMEDIATE RELEASE:

Ingham County Register of Deeds Curtis Hertel Jr. has filed a lawsuit today in the 30th Circuit Court, to recover millions in alleged unpaid transfer taxes from mortgage servicers and their attorneys.

“This is money that should have been applied to the county’s general funds, which could have been used for public safety, health programs, or countless other public services,” said Hertel. “Additionally, the state taxes collected would have gone straight to the school aid fund. It’s time for some of the banks responsible for the foreclosure mess to pay their fair share, instead of allowing our county’s taxpayers to bear all of the burden.”

Transfer taxes are the monies paid when a new deed is recorded in the county’s Register of Deeds office. The taxes apply to the sale price of the property being transferred, unless it falls under $100. Many large-scale banks have used Fannie Mae and Freddie Mac to claim an exemption to the taxes by identifying themselves as government entities, which Hertel contests.

”Depending on the amount of the judgment, this could provide a needed boost to our county’s constrained budget,” said Ingham County Treasurer Eric Schertzing. “The foreclosure crisis has drained county tax dollars in many ways – not merely in uncollected property taxes, but also because Fannie Mae and Freddie Mac were claiming these federal exemptions while re-selling foreclosed homes.”

The official transfer tax rate for counties in Michigan is $1.10 for every $1,000 of value being transferred. So the sale of a $100,000 home would typically carry a $110.00 tax. State taxes on the same transactions stretch even further – $7.50 for every $1,000 of value being transferred. It is estimated that the lawsuit could fetch a judgment in the millions of dollars.

“MFI-Miami, an internationally recognized mortgage fraud investigation firm based in Florida, has been instrumental in assisting in our investigation of this,” said Hertel. William Maxwell, Dan Marsh and Brian Parker from the Home Defense League, PLC, working in conjunction with MFI-Miami discovered a pattern of unpaid transfer taxes on foreclosure sales across Michigan. “The fact is banks and mortgage servicers, in concert with their foreclosure firms, failed to pay state and county transfer taxes,” said Steve Dibert of MFI-Miami, who has been part of the document examination.

Hertel is also working with other members of the Michigan Association of Registers of Deeds. “We are cooperating with other municipalities to join us in this fight, because this not just an Ingham County problem, it a problem that affects all 83 counties in the state.”

“Currently, the Michigan Association of Registers of Deeds, Inc. is compiling data from documents representing taxable transfers from these and other entities to determine the potential amount owed Michigan counties,” said president Bambi Somerlott. “Accordingly, each county will, in its discretion, use the information and proceed as they deem appropriate.”

Hertel has received the support of the Ingham County Board of Commissioners, and will announce the lawsuit at a press conference at 1:00 pm today. He has chosen the site of 1117 S Grand Avenue, a home that was recently subject to tax foreclosure, to make the announcement. “The banks should bear their share of responsibility for our current housing climate, and their role in what has happened is becoming more clear as time passes,” said Hertel. “We will do everything we can to pursue financial justice.”

GSF Mortgage Corporation was the original lender in this case. Wells Fargo Bank, as Trustee for Option One Mortgage Loan Trust 2006-3, and its servicer, American Home Mortgage Servicing, Inc., sought to set aside the automatic bankruptcy stay in order to foreclose on the Veals. The note was not endorsed to Wells Fargo or to the trust. As part of their efforts to establish standing, and real-party-in-interest status, Wells Fargo and American Home Mortgage Servicing, the servicer for the Trust, filed a mortgage assignment.

The Assignment was prepared by Docx, LLC in Alpharetta, GA, the document mill made famous by Fraud Digest, then by 60 Minutes, Reuters, The Washington Post, the New York Times, Huffington Post, Firedoglake, Naked Capitalism, Foreclosure Hamlet, 4closure Fraud, Stop Foreclosure Fraud, the Wall Street Journal, and many others. While Docx is now closed, its documents live on in courts and recorders offices across the country.

The Veal Assignment was signed by Tywanna Thomas and Cheryl Thomas who claimed to be officers of Sand Canyon Corporation formerly known as Option One Mortgage. From deposition testimony of Cheryl Thomas, it is known that both Cheryl and Tywanna Thomas were actually employees of Lender Processing Services, the company that owned Docx. There are many different versions of the Tywanna Thomas signature because, as we now know, the employees in Alpharetta forged each other’s names on witnessed and notarized documents.

The Assignment was signed (by someone) on November 10, 2009, but a line on the Assignment right underneath the legal description of the property states:
“Assignment Effective Date 10/13/2009.”

The closing date of the trust was October 27, 2006, almost three years prior to the Assignment effective date. Investors were told the trust would obtain actual Assignments to the Trust of the mortgages pooled in that trust by the closing date.

Dale Sugimoto, the president of Sand Canyon, said in a sworn affidavit on March 18, 2009, filed in the Ron Wilson bankruptcy case in the Eastern District of Louisiana, Case No. 10-51328, Document 52-3, that Sand Canyon does not own any residential mortgages and has no servicing rights.

To summarize:

1. Cheryl Thomas and Tywanna Thomas were not officers of Sand Canyon, as represented on the Assignment. Someone other than Tywanna Thomas and Cheryl Thomas often forged their names.

2. The Veal loan was not transferred to the Option One trust effective October 13, 2009, as represented on the Assignment.

3. Sand Canyon did not own the Veal mortgage and, therefore, had no authority to assign the mortgage to the Option One Trust. The Latin phrase – Nemo dat quod non habit – best covers this situation. Translation: one cannot give what one does not have.

Investors in this Option One trust, the Bankruptcy Judge in the Veal case, bankruptcy trustees with similar documents, homeowners and their lawyers, the SEC, and the Justice Department must all demand answers (and reparations) from the Trustee, the document custodian, the servicer and Lender Processing Servicing.

Argued and Submitted on June 18, 2010
at Phoenix, Arizona
Filed – June 10, 2011
Appeal From The United States Bankruptcy Court
for the District of Arizona

Honorable Randolph J. Haines, Bankruptcy Judge, Presiding

Before: MARKELL, KIRSCHER and JURY, Bankruptcy Judges.

EXCERPTS:

The Substantive Law Related to Notes Secured by Real Property

Real party in interest analysis requires a determination of the applicable substantive law, since it is that law which defines and specifies the wrong, those aggrieved, and the redress they may receive. 6A Federal Practice and Procedure § 1543, at 480-81 (“In order to apply Rule 17(a)(1) properly, it is necessary to identify the law that created the substantive right being asserted . . . .”). See also id. § 1544.

1. Applicability of UCC Articles 3 and 9
Here, the parties assume that the Uniform Commercial Code (“UCC”) applies to the Note. If correct, then two articles of the UCC potentially apply. If the Note is a negotiable instrument, Article 3 provides rules governing the payment of the obligation represented by and reified in the Note.

[…]

In particular, because it did not show that it or its agent had actual possession of the Note, Wells Fargo could not establish that it was a holder of the Note, or a “person entitled to enforce” the Note. In addition, even if admissible, the final purported assignment of the Mortgage was insufficient under Article 9 to support a conclusion that Wells Fargo holds any interest, ownership or otherwise, in the Note. Put another way, without any evidence tending to show it was a “person entitled to enforce” the Note, or that it has an interest in the Note, Wells Fargo has shown no right to enforce the Mortgage securing the Note. Without these rights, Wells Fargo cannot make the threshold showing of a colorable claim to the Property that would give it prudential standing to seek stay relief or to qualify as a real party in interest.

Accordingly, the bankruptcy court erred when it granted Wells Fargo’s motion for relief from stay, and we must reverse that ruling.

[…]

AHMSI apparently conceded that Wells Fargo held the economic interest in the Note, as it filed the proof of claim asserting that it was Wells Fargo’s authorized agent. Rule 3001(b) permits such assertions, and such assertions often go unchallenged. But here the Veals did not let it pass; they affirmatively questioned AHMSI’s standing. In spite of this challenge, AHMSI presented no evidence showing any agency or other relationship with Wells Fargo and no evidence showing that either AHMSI or Wells Fargo was a “person entitled to enforce” the Note. That failure should have been fatal to its position.

[…]

IV. CONCLUSION

For all of the foregoing reasons, the bankruptcy court’s order granting Wells Fargo’s relief from stay motion is REVERSED, and the order overruling the Veals’ claim objection is VACATED and REMANDED for further proceedings consistent with this opinion.

TAMPA – When a lender fails to find a homeowner to notify them of a foreclosure lawsuit, a judge often appoints a guardian ad item. That attorney is supposed to represent the property owner’s interests.

The alleged splitting of attorney fees between foreclosure law firms and third-party mortgage servicing providers is the subject of another lawsuit, bringing the number of cases filed on this issue to five within the past seven months, said Nick Wooten, an Alabama-based plaintiff’s attorney involved in all of the cases.

By mid-May, Wooten said he expects to file 10 to 12 additional cases, making similar allegations about what he claims are illegal, split-attorney fee arrangements between mortgage servicing outsourcers and law firms. The cases are concentrated in the Northern District of Mississippi, the Southern District of Alabama and the Northern District of Florida-Pensacola division.

The latest filing is in bankruptcy court in the Northern District of Florida, In re Harris, and involves both LPS (the parent company and its subsidiary LPS Default Solutions) and major Florida foreclosure mill Ben-Ezra & Katz. The bankruptcy clients of Ben Ezra are the group that the litigation seeks to have certified as a class. Note that the usual remedy for the sharing of impermissible legal fees is disgorgment. In addition, the suit lists ten causes of actions, of which the fee sharing is only one.

The absolute beauty of this all, is when one of the greatest gets the word out.

Understand that us bloggers don’t have the means both in funding nor in the capacity of such a global platform, but what us bloggers do have most importantly, a POWERFUL VOICE, your voice to manage to get the word out.

Make no mistake, no coincidence…In many opinions, insiders are tipped before anything major will break and why timing is EVERYTHING.

“ONE too many times, this court has been witness to the shoddy practices and sloppy accountings of the mortgage service industry. With each revelation, one hopes that the bottom of the barrel has been reached and that the industry will self correct. Sadly, this does not appear to be reality.”

(Reuters) – A federal bankruptcy judge in New Orleans said she will impose sanctions on Lender Processing Services, after concluding that the mortgage servicing company deliberately committed fraud on the court in a foreclosure case, by giving false testimony and submitting a “sham” affidavit.

The fraud perpetrated on the Court, Debtors, and trustee would be shocking if this Court had less experience concerning the conduct of mortgage servicers.

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF LOUISIANA

IN RE:
RON WILSON, SR.
LARHONDA WILSON
DEBTORS

Excerpt:

III. ConclusionThe fraud perpetrated on the Court, Debtors, and trustee would be shocking if this Court had less experience concerning the conduct of mortgage servicers. One too many times, this Court has been witness to the shoddy practices and sloppy accountings of the mortgage service industry. With each revelation, one hopes that the bottom of the barrel has been reached and that the industry will self correct. Sadly, this does not appear to be reality. This case is one example of why their conduct comes at a high cost to the system and debtors.

The hearing on the Motion for Sanctions provides yet another piece to in the puzzle of loan administration. In Jones v. Wells Fargo,104 this Court discovered that a highly automated software package owned by LPS and identified as MSP administered loans for servicers and note holders but was programed to apply payments contrary to the terms of the notes and mortgages. In In re Stewart,105 additional information was acquired regarding postpetition administration under the same program, revealing errors in the methodology for fees and costs posted to a debtor’s account. In re Fitch,106 delved into the administration of escrow accounts for insurance and taxes. In this case, the process utilized for default affidavits has been examined. Although it has been four (4) years since Jones, serious problems persist in mortgage loan administration. But for the dogged determination of the UST’s office and debtors’ counsel, these issues would not come to light and countless debtors would suffer. For their efforts this Court is indebted.

For the reasons assigned above, the Motion for Sanctions is granted as to liability of LPS.

The Court will conduct an evidentiary hearing on sanctions to be imposed.

In re: RON WILSON, SR. LARHONDA WILSON, Chapter 13, Debtors.

Case No. 07-11862.

United States Bankruptcy Court, E.D. Louisiana.

April 6, 2011.

MEMORANDUM OPINION

ELIZABETH W. MAGNER, Bankruptcy Judge

On December 1, 2010, the Motion for Sanctions[1] filed by the United States Trustee (UST) came before the Court. At the beginning of the hearing, a request to bifurcate the issues presented was granted. Hearing on the sanctions to be awarded was deferred to a separate hearing, pending determination of liability for sanctionable conduct. After trial on the merits, the Court ordered that simultaneous briefs be submitted no later than February 1, 2011. Upon the filing of briefs, the matter was taken under advisement.

I. Procedural History and Facts Leading to Expanded Order to Show Cause

Option One Mortgage Corporation (“Option One”) holds a mortgage on Ron and LaRhonda Wilson’s (“Debtors”) home payable in monthly installments. On September 29, 2007, Debtors filed a voluntary petition under chapter 13 of the Bankruptcy Code. At the time of their bankruptcy filing, Debtors were in default on the mortgage, and a prepetition arrearage was owed. Debtors’ plan of reorganization provided for monthly payments to the trustee for satisfaction of the prepetition arrearage, and Debtors’ direct payment of monthly postpetition mortgage installments to Option One. The plan was confirmed on December 21, 2007.[2]

Option One filed a Motion for Relief From Stay on January 7, 2008 (“First Motion”).[3] The First Motion alleged that Debtors had failed to make the monthly postpetition installment payments for November 2007 through January 2008. The First Motion requested relief from the automatic stay to enforce payment of the debt in a foreclosure action. On February 4, 2008, Debtors responded averring they were current and that Option One had failed to credit several postpetition payments to their account.[4]

Because Option One failed to supply evidence of default, the First Motion was denied without prejudice.[5] Option One filed a new Motion for Relief From Stay on March 10, 2008 (“Second Motion”).[6] The Second Motion alleged that Debtors were in default for “over four (4) months now. . .” Option One also stated that “Due to the Debtors’ failure to maintain the monthly [postpetition] payments, there exists the possibility that real estate taxes may go unpaid or insurance on the property may lapse because of the shortage in the Debtors’ escrow account.”

The Second Motion was supported by an affidavit of Dory Goebel, Assistant Secretary for Option One. In the affidavit, Ms. Goebel averred under oath that Option One was the holder of the secured claim in Debtors’ case. To support her affidavit, Ms. Goebel attached a copy of a note and mortgage executed by Debtors and an endorsement to Option One by America’s Mortgage Resource, the original payee on the note.

Ms Goebel affirmed:

Appearer has reviewed and is familiar with the mortgage loan account of RON WILSON, Sr. And LA RHONDA WILSON (“Mortgagor”) represented by the afore described note and mortgage and the records and data complications [sic] pertaining thereto, which business records reflect acts, events or condition made at or near the time by Dory Goebel, or from information transmitted by a person with knowledge thereof and which records and data complications [sic] are made and kept as a regular practice of the regularly conducted business activities of OPTION ONE MORTGAGE CORPORATION.

Ms. Goebel then declared that the balance due on the note was $176,063.27 and that Debtors were in default under their plan for failure to pay the monthly installments accruing from November 1, 2007, through February 1, 2008. Ms. Goebel represented that the last payment on the note was applied to the October 1, 2007 installment.

Debtors opposed the Second Motion alleging that all postpetition installments were paid by money order, cashier’s, or personal check and that all payments by cashier’s or personal check were delivered by certified mail.[7] At the initial hearing on the Second Motion on April 8, 2008, Debtors offered into evidence proof of payment for installments made on the Option One note. Debtors’ evidence included:

1. October 2007 payment — confirmation by Western Union that a money order was delivered to Option One on October 20, 2007, in the amount of $1546.64 and receipt was acknowledged by Option One on October 27, 2007.

2. November 2007 payment — confirmation by Western Union that a money order was delivered to Option One on November 30, 2007, in the amount of $1546.64 and receipt was acknowledged by Option One on November 30, 2007.

3. December 2008 payment-copy of a certified mail receipt showing delivery to Option One on January 2, 2008. Debtors alleged tender of a cashier’s check #XXXXXXXXXXXXXXXXXXXX for $1546.84.

4. January 2008 payment-a copies of a cashier’s check for $1000.00 and two money orders for $546.84 and $312.00 both dated January 25, 2008; certified mail receipts evidencing delivery to and acknowledging receipt by Option One on January 31, 2008.

5. February 2008 payment — copies of a cashier’s check for $1546.84 and a personal check for $78.00; as well as a receipt for certified mail delivery on February 28, 2008, and acknowledging receipt by Option One on March 3, 2008.

6. March 2008 payment — copies of two cashier’s checks for $1546.84 and $78.00; as well as a receipt for certified mail delivery on March 28, 2008, and confirmation of delivery to Option One by the United States Postal Service on March 31, 2008.[8]

Both the First and Second Motions were filed by Mr. Clay Writz of the Boles Law Firm (“Boles”) representing Option One. However, Mr. Timothy Farrelly of Nicaud, Sunseri, & Fradella appeared on behalf of Option One at the hearing on the Second Motion. At the conclusion of the hearing, the Court continued the matter until April 22, 2008, in order to allow Option One the opportunity to trace the alleged payments and provide an accounting of the loan’s payment history from petition date through April 2008.

On April 22, 2008, the continued hearing on the Second Motion was held. Mr. Farrelly again appeared on behalf of Option One. At the hearing, Debtors’ counsel represented that Mr. Wirtz had contacted him at 5:30 p.m. the night before requesting a continuance due to a conflict in another court. Mr. Wirtz stated that he had not reviewed the prior evidence and was not prepared to address the issues raised by Debtors in their Opposition. Option One did acknowledge, through a pleading filed by Mr. Wirtz the night before the hearing, the receipt of three (3) additional and previously undisclosed payments:

1. Payment dated October 22, 2007, in the amount of $1546.84 applied to the installment due October 1, 2007;

2. Payment dated December 3, 2007, in the amount of $1546.84 applied to the installment due November 1, 2007; and

3. Payments of $1546.84 and $78.00 dated April 2, 2008, applied to installment due December 1, 2007.

The pleading was not the accounting ordered by the Court, but instead a chart reflecting the receipt and application of three (3) payments postpetition. The pleading again asserted that the funds delivered were insufficient to satisfy the amounts due and reasserted Option One’s request for relief.[9]

Since Debtors’ evidence indicated 1) additional payments not acknowledged by Option One; 2) Option One had failed to supply the ordered accounting or address the additional payments made by Debtors; and 3) Mr. Farrelly lacked any knowledge regarding the loan, the Court determined that Option One’s response was insufficient and issued show cause orders for Mr. Wirtz, Dory Goebel, and Option One.[10] The merits of the Second Motion were again continued to afford Option One and Ms. Goebel the opportunity to respond to the allegations raised by the Opposition and subsequent admission by Option One that three (3) unaccounted for payments were not included in its motion.[11]

On June 26, 2008, a third hearing on the Second Motion and the initial hearing on the show cause orders was conducted. Mr. Wirtz appeared at the hearing, but Ms. Goebel was not present. Mr. Wirtz admitted that Debtors were in fact current on their loan. Mr. Wirtz also admitted receipt of $7,513.53 in funds on Debtors’ account and stipulated that Debtors were current through and including May 2008. Mr. Wirtz admitted that between the filing of the First and Second Motions, Option One located one (1) payment which was applied to the October 2007 installment.

Regarding the show cause order, Mr. Writz represented that his contact was Fidelity National Foreclosure Solutions, n/k/a Lender Processing Services (“LPS”) and that all information regarding payments, defaults, or inquires were taken by him from a LPS website or LPS personnel.[12]

Mr. Wirtz represented that additional unapplied payments were only discovered when they arrived at his office.[13]Specifically, he stated that payments were delivered on February 18, 2008, in the amount of $1,858.84; March 7, 2008, in the amount of $1,624.17; May 12, 2008, in the amount of $1,624.84; and May 22, 2008, in the amount of $1,524.84. Because payments were received by Mr. Wirtz on February 18 and March 7 and prior to the filing of the Second Motion, Mr. Wirtz was sanctioned for his failure to disclose this fact in the Second Motion or correct the representations made in his pleadings.

Nevertheless, based on the information available to Mr. Writz when the Second Motion was filed, it appeared that the payments received from Option One were insufficient to alert Mr. Wirtz that the loan was entirely current. As a result, the Court ordered further investigation into the receipt and application of payments by Option One in a continued effort to uncover the cause of the erroneous filing. The Court jointly sanctioned Option One and Ms. Goebel $5,000.00 for failure to appear and $5,000.00 for filing a false affidavit.[14] Option One was also ordered to pay $900.00 in attorney’s fees to Debtors’ counsel. The Court sanctioned Mr. Wirtz $1,000.00 for failing to amend the Second Motion and Default Affidavit once he obtained information which revealed that they were false.[15] The Court continued the hearing on the show cause order against Ms. Goebel and Option One to August 21, 2008.[16] Based on Mr. Wirtz’s representations, an additional show cause order was issued for LPS.[17]

On July 9, 2008, LPS voluntarily intervened “to clarify its role in this matter and to address any misconceptions or misunderstandings which may have been left with the Court regarding that role.”[18] On August 21, 2008, the Court held an evidentiary hearing on the Orders to Show Cause. Participating at the hearing were representatives and counsel for Boles, LPS, Option One, the UST and Debtors.

Fidelity does work for Option One, and basically Fidelity’s role is almost as a conduit and storage of information and data. Option One will send their information to Fidelity, and then attorneys such as Clay [Wirtz] can access that information.[19]

***

. . . [B]asically Fidelity became—if you think if it almost as a library, various clients could put their information in that library. The attorneys would go to the library, check out the information, and that’s how things would happen. One of the services that we provided, and no longer do, but one that we did is executing affidavits such as the one in this case.[20]

***

Ms. Goebel is an employee of Fidelity. The various clients in this case, including Option One, would sign a corporate resolution, and I have a copy of a corporate resolution, that would give her limited authority as a vice president for particular purposes. And in this case one of the purposes was executing the affidavit.[21]

Cash: . . a number of clients sign their own, Your Honor. Sometimes they would want us to, simply because we have people like Ms. Goebel who handle the accounts on a daily basis, who review the material, who have access to the material, and it was simply one less thing that the client had to do, that we would do.[22]

***

Cash: . . . and when Ms. Goebel would execute the affidavit she would have access to the same information as someone at Option One. She would go into their system, look at what has been posted, what hasn’t been posted. And I think what happened here was just a series of miscommunications . . .[23]

***

Cash: . . . And I think that the simple explanation here, . . . and I think it’s one that’s clearly human error that can happen, is there was a payment sent. There was an error made where that payment was sent, because this was in bankruptcy. . . . that payment was sent to the Boles Firm, rather than being posted. And that was basically, I think, someone in Mr. Wirtz’s office had instructed Option One, “Send us the checks and we will send them back,” or “we will take care of that.”[24]

Mr. Cash then offered the testimony of Ms. Goebel who is both an employee of LPS and was an authorized signer of default affidavits for Option One. Ms. Goebel testified as to the process by which a default affidavit is executed. In particular, Ms. Goebel explained:

To execute such an affidavit, once I receive the affidavit, I will review the information that is in the affidavit with Option One’s system. So, I will validate the information based on their system and the information that is there.[25]

At the August 21, 2008, hearing, Ms. Goebel represented that from her desk she would log into Option One’s computer system and verify the information in the affidavit. She also represented that she had access to Option One’s entire record of the loan.[26] She stated that she verified this information with LPS’ own system which reflected the communications between Option One’s law firm and Option One.[27] Ms. Goebel represented that LPS only maintained a “library” of information that Option One supplied.[28]

She confirmed that she reviewed a debtors’ entire loan history prior to executing the affidavit[29] and would also review communications between counsel and LPS in connection with the signing of the affidavit. She, however, would not review communications between counsel and Option One.[30]

Ms. Goebel explained that LPS had no way to verify unposted payments.[31] She stated emphatically that after reviewing Debtors’ file, she found no communications between LPS and Boles about any additional payments tendered after the filing of the motions.[32] Ms Goebel also testified that after reviewing Debtors’ loan file before testifying, she saw no communications between LPS and Option One.[33] She asserted that it was Option One’s responsibility to notify counsel should a change in circumstance warrant the withdrawal of a motion for relief[34] and that LPS never stopped legal actions once it referred a loan to counsel.[35]

The testimony presented by Option One, however, did not agree with Mr. Cash or Ms. Goebel’s representations. Mr. Arthur Simmons of American Home Mortgage, formerly Option One, testified for Option One. Mr. Simmons was the person tasked with the day to day administration of Debtors’ loan once their bankruptcy was filed.

Mr. Simmons testified that once a borrower filed for bankruptcy, LPS opened a bankruptcy workstation or subprogram to administer the loan. Option One was given notice that this had occurred.[36]

Once a bankruptcy workstation is opened, Option One would take no action unless requested by LPS, who was described as actually administering the loan.[37] As previously explained in In reStewart,[38] LPS markets to loan servicing companies and note holders a very sophisticated loan management program commonly referred to in the industry as “MSP.” MSP interfaces with a client’s computer system collecting information and monitoring a loan’s status. When certain events occur, the program is designed to take action without human intervention. For example, when a loan reflects past due payments for a specified period of time, generally forty-five (45) days, MPS will generate a demand or default letter to the borrower. The timing or triggers for various loan administrative actions are set by the lender or servicer but executed by MSP as overseen by LPS.[39]

When a bankruptcy is filed, the bankruptcy workstation is activated and provides a set of additional parameters, tasks and actions that can be performed by the program or those that use it in a bankruptcy. For example, when a loan is sixty (60) days postpetition delinquent, the system will notify of this event and typically trigger a referral to counsel for the filing of a motion for relief.[40]

Mr. Simmons represented that LPS manages all tasks required during the administration of a loan during bankruptcy. If counsel needs instruction, LPS is contacted and only if LPS cannot solve counsel’s problem, is Option One involved.[41]

Although Debtors’ filed for bankruptcy relief on September 29, 2007, the bankruptcy workstation was not activated by LPS until November. Because LPS delayed setting up the workstation, Debtors’ first postpetition payment, made in October 2007, was not posted to the October installment but to June 2007, the earliest outstanding prepetition installment. As a result, the system showed October 2007 installment as past due.[42]

When Debtors’ file was reviewed by LPS for referral to counsel, the postpetition due date was not accurate because it did not reflect the October payment.[43] To avoid this type of problem, Option One had procedures in place for LPS to follow if activation of a bankruptcy workstation was delayed. In such a case, LPS was directed to search for payments that might have been delivered after the bankruptcy filing date but prior to activation of the workstation. If any were found, LPS was to apply the payments to postpetition installments correcting the posting error. Mr. Simmons testified that LPS had the ability to adjust the application of payment in this circumstance and it was their responsibility to do so.[44]

Mr. Simmons also testified that Option One’s computer system generated reports when a debtor was 45 to 60 days postpetition past due.[45] In this case, a delinquency report was generated in December, when the incorrect posting for October led the computer to read a 60 day postpetition delinquency.

LPS maintained an on site employee at Option One who reviewed the post bankruptcy delinquency reports. That employee reviewed the list, then entered a request on LPS’ system for a motion for relief referral.[46]

If a payment was received after a file had been referred to counsel for action (i.e. the filing of a motion for relief from stay), Option One’s policy was to request that LPS contact counsel for instruction. If LPS could not satisfy counsel’s request, only then would LPS contact Option One. Although direct communications between counsel and Option One were not prohibited, they were rare because it was LPS’ responsibility to manage the loan. This case appears to have followed the normal chain of administration because there was no evidence that Boles had any, or attempted any, direct communications with Option One.[47]

When Option One received the payment for December 2007, LPS sent an inquiry to Boles for instructions. Boles replied that Option One should send the payment to it.[48] Option One contacted LPS for instructions on each payment as it was received from December through March.[49] As each postpetition payment arrived from Debtors, Option One communicated with LPS, LPS with Boles, and then LPS reported back to Option One the instruction received.[50] As a result, Debtors’ postpetition payments for December 2007 through March 2008 were not posted, but instead were reflected on a cash log that was not available to either Mr. Wirtz or LPS.[51] However, LPS knew of the payments because it was communicating directly with Mr. Wirtz and Option One on the issue.[52]

All Motions for Relief from Stay or Affidavits of Default are submitted by counsel directly to LPS. Option One neither proof reads nor reviews these documents.[53] If an Opposition is filed, Option One does not read it. Instead, Option One employs LPS for the purpose of handling any issues pertaining to the loan or Motion for Relief. LPS contacts Option One only if it cannot handle a matter.[54]

In this case, LPS contacted Option One about Debtors’ claim of missing payments. Option One replied that the payments were with Mr. Wirtz.[55]

The UST made an appearance for the purpose of assisting the Court in its investigation.[56] The obvious conflict between the testimony of Mr. Simmons and Ms. Goebel and representations by counsel for LPS led the Court to accept the UST’s offer for assistance. As a result of the foregoing, the Court continued the hearing on August 21, 2008, without date to allow formal discovery.[57]

From July 9, 2008, through December 2010, the parties conducted contentious discovery. Ten (10) motions to quash, compel, clarify, reconsider orders, stay proceedings, request protective orders; and appeal interlocutory orders were considered along with responses, oppositions and replies to each. On May 21, 2010, the UST filed a Motion for Sanctions against LPS and Boles.[58]

On December 1, 2010, trial on the merits of the UST’s intervening Motion for Sanctions[59] against LPS was heard.

II. Law and Discussion

Q: Mr. Simmons, what was the amount due on the . . . Wilson account on February, 28th, 2008? . . .

A: Actually, the loan was current, if in fact we would have accounted for all the monies received. . . .

Q: What about on March 10, 2008? What was the amount due on the mortgage loan at that date?

A: Again, the loan would have been current. . . . .[60]

Debtors filed bankruptcy on September 29, 2007. Notification of that fact was mailed to Option One on October 6, 2007.[61] LPS encoded the bankruptcy filing on November 21, 2008. The process was completed on November 23, 2008.[62]

Debtors sent their first postpetition mortgage payment of $1,546.84 via Western Union on October 21, 2007. Because LPS failed to alert its system that a bankruptcy had been filed, this payment was applied to Debtors’ earliest past due prepetition installment, June 2007.

Debtors forwarded another $1,546.84 payment to Option One on November 30, 2007. That payment was intended to satisfy the postpetition installment due November 1, 2007. Instead, Option One applied the payment to the October 1, 2007, installment, the date showing due on the system.[63]

On December 21, 2007, LPS entered a referral to Boles requesting a Motion for Relief from Stay based on two (2) past due postpetition payments (November 1 and December 1, 2007).[64] The First Motion was filed by Boles on January 7, 2008.[65] In the interim, LPS received notification that a payment of $1,546.84, one (1) monthly installment, had been made by Debtors.[66] LPS requested posting instructions from Boles, who directed LPS to send the payment to the firm.[67]

On January 25, 2008, Debtors sent $1,858.84 to Option One. That payment was received on January 31, 2008. Again, LPS was notified by Option One of the payment, and on February 1, 2008, LPS requested posting instructions from Boles.[68] Boles responded three (3) days later directing LPS to send the payment to it.[69] On February 4, 2008, Boles advised LPS that the First Motion would go to hearing on February 12, 2008. Boles cited “Judge delay” as the reason, but in reality, Debtors opposed the First Motion.[70] In the Opposition, Debtors alleged that all payments had been made on the loan postpetition, challenging the allegations of Option One’s First Motion that the loan was postpetition delinquent for November 1, 2007, and all installments thereafter.

Putting aside the posting issue created by LPS’s failure to properly account for Debtors’ bankruptcy filing, the allegations of the First Motion also failed to acknowledge Option One’s receipt of $1,546.84 on January 2, 2008.[71]

LPS was also alerted by Boles on February 6, 2008, of Debtors’ Opposition. Boles requested a “pencil post” of the loan.[72] Boles’ understanding of a “pencil post” was a manual accounting of a loan payment history used to verify the status reflected by the computer file. In reality, LPS only manually reviews what is already on the computer system and recopies it onto a spread sheet.

Evidently in performing the “pencil post,” LPS discovered the misapplied October payment and requested correction on February 11, 2008. The manual adjustment also corrected the application of the two (2) Western Union payments received postpetition. However, no mention was made of the two (2) additional unposted payments discussed in the preceding communications between LPS, Option One, and Boles. On February 15, 2009, LPS sent a message to Boles that according to Option One, its cash log reflected forwarded payments to Boles in an amount sufficient to bring the loan current. However, LPS instructed Boles that if in fact the funds Boles held were insufficient to bring the loan current, Boles should consider the loan past due as of December 1, 2007.[73]

In response to LPS’ message on February 15, 2008, Boles acknowledged receipt of $1,858.84 in funds. Assuming they were applied to the December 2007 installment, payments for January and February 2008 were still due.[74][75] On February 27, 2008, Debtors’ account was adjusted to show a past due date of December 1, 2007.[76][77] Therefore, as of February 15, Boles had not received enough funds to bring the loan current and communicated this fact to LPS. No further investigation or response was made as to the whereabouts of the missing January 2008 payment. On February 27, 2008, Boles forwarded an affidavit to Ms. Goebel at LPS for execution in connection with the Second Motion. The affidavit alleged Debtors were past due as of November 2007, which was in conflict with the allegations contained in the Second Motion which now reflested a past due date as of December 1, 2007.

As part of its default services, LPS executed Affidavits of Default in support of Motions for Relief from Stay. LPS testified that it was just one of the services that LPS provided to clients.[78] The affidavit is typical. It purports to be executed under oath before a notary and two (2) witnesses.

It provides the name and title of the affiant and represents that the affiant has personal knowledge of the facts contained in the affidavit.[79] In fact, it is a sham.

When an affidavit is received by LPS, an employee prints the document and delivers it to one of twenty-eight (28) LPS employees authorized by Option One to execute the document on its behalf.[80] By corporate resolution, Option One grants these individuals “officer” status, but limits their authority to the signing of default affidavits. These “officers” execute 1,000 documents per day for Option One and other clients similar to the one used in this case.[81] In fact, Ms. Goebel is an employee of LPS with little or no connection to Option One. Each day Ms. Goebel receives approximately thirty (30) documents to sign.[82] The process of signing default affidavits is rote and elementary.

As Ms. Goebel is also a manager of a work unit at LPS, she allocates two (2) hours per day for document execution and estimates that it takes her five (5) to ten (10) minutes to sign each affidavit she receives.[83] Before signing an affidavit, Ms. Goebel follows the procedures directed by LPS. She checks three (3) computer screens that provide the amount of the installment payment, the total balance due on the loan, and the due date for the earliest past due installment.[84][85] She matches this information with that contained in the affidavit. If it is correct, she signs the document and forwards it to a notary for execution.

Although the affidavit in this case purported to verify that Option One was the holder of the note owed by Debtors through an assignment, Ms. Goebel does not personally know this to be a fact and made no effort to verify her assertion.[86] Similarly, the affidavit identifies the mortgage and note as exhibits to the affidavit, but Ms. Goebel neither checks the attachments nor verifies that they are correct. In fact, the affidavits she signs never have any attachments when forwarded to her for execution, and she never adds any.[87]

Although the affidavit represents that it was executed in the presence of a notary and witnesses under oath, no oath is ever administered, and the signatures of the affiant, notary, and witnesses are separately affixed and outside the presence of each other.[88] Ms. Goebel has no personal knowledge regarding the loan file save for the three (3) or four (4) facts read off a computer screen that she neither generates nor understands.[89] She does not review any other information pertaining to the loan file, even information available to her.[90] LPS admitted that Ms. Goebel followed its procedures and that those procedures were used in all cases.[91]

Ms. Goebel’s training on the seriousness of her task was sorely lacking. She could not remember who “trained” her when she was promoted in 2007 to a document execution position.[92] She could not remember the extent or nature of her training.[93] She did surmise that written procedures were given to her and then she began “signing.”[94] She described her task as “clerical”[95] and repeatedly expressed the belief that the affidavits were counsel’s affidavits, and therefore, she relied upon counsel regarding their accuracy.[96] In this admission, the real problem surfaces.

Default affidavits are a lender’s representation as to the status of a loan. They are routinely accepted in both state and federal courts in lieu of live testimony. They are an accommodation to the lending community based on a belief by the courts that the facts they present are virtually unassailable. The submission of evidence by affidavit allows lenders to save countless hours and expense establishing a borrower’s default without the need for testimony from a lending representative. While they can be refuted by a borrower, too often, a debtor’s offer of alternative and conflicting facts is dismissed by those who believe that a lender’s word is more credible than that of a debtor. The deference afforded the lending community has resulted in an abuse of trust.

The abuse begins with a title. In this case, Ms. Goebel was cloaked with the position of “Assistant Secretary,” in a purposeful attempt to convey an experience level and importance beyond her actual abilities. Ms. Goebel is an earnest young woman, but with no training or experience in banking or lending. By her own account, she has rocketed through the LPS hierarchy receiving promotions at a pace of one (1) promotion per six (6) to eight (8) month period.[97] Her ability to slavishly adhere to LPS’ procedures has not only been rewarded, but has assured the development of her tunnel vision. Ms. Goebel does not understand the importance of her duties, and LPS failed to provide her with the tools to question the information to which she attests.

For example, the following exchange occurred between the Court and Ms. Goebel:

Q: . . . if you look at paragraph 2 at the bottom there is “see attached copy of the Notice, Exhibit A, certified copy of the mortgage is Exhibit B, and copy of the assignments is Exhibit C.” Is your testimony that those documents were not attached to the affidavit when you signed it. .?

A: Typically, those exhibits would not be attached.

Q: . . So, . . . counsel would attach those after you signed..?

A: … we relied on the attorney. We believed the information that they were giving us and what they were going to attach, because this is their affidavit. It would be accurate.[98]

***

Q: . . . Did you check any screen to see if in fact there was a note, there was a mortgage, there were assignments?

A: That would be the responsibility of the attorney.

Q: . . so you didn’t verify that information at all?

A: No…[99]

***

Q: … And you don’t sign it [the affidavit] in the presence of the notary or the witnesses?

A: That’s correct.[100]

***

Q: You weren’t put under oath by a notary before you signed the Affidavit of Debt?

A: No.

Q: And you didn’t really have personal knowledge of the contents [of the affidavit] because you just said the information involving the existence of the mortgage and the note and so on you relied on the Boles Law Firm to have that information correct.

A: Right. As I stated earlier, it was the Boles Law Firm. Option One had hired them to kind of handle this work and had asked LPS to help clerically sign these. We relied on the Boles Law Firm.

Q: Ms Goebel…Have you ever refused to sign an affidavit for a reason other than the note payment amount was incorrect, the due date on the affidavit was incorrect, the number of installment payments that were past due was incorrect, or …that you were not a [authorized] signatory…?

A: Not to my recollection, no.

Q: .. So if, … you had know[n] that there were three payments that were not posted on this account . . . that were in the possession of either Option One or the law firm, would you have still signed the affidavit?

A: In my opinion, yes. I was getting an affidavit from a law firm that I trusted. They’re the legal experts on the matter and Option One is in charge of their cash posting. I’m not the decision maker of, you know, should they proceed. The attorney would have that knowledge.[102]

It is evident that the training provided Ms. Goebel by LPS was insufficient and negligent. LPS was the first line of communication with counsel. The evidence was clear that Option One was contacted only if LPS employees could not satisfy counsel’s requests. Counsel did not communicate directly with Option One, and although Option One controlled the physical posting of payments, LPS managed the communications between Option One and its counsel regarding them. In this case, LPS had personal knowledge of four (4) critical facts. First, that as of February 15, 2008, Option One had received two (2) payments from Debtors in amounts sufficient to satisfy the installments due for December and January. Second, counsel had directed that the payments be sent to it rather than posted. Third, Option One alerted LPS in February that the amounts forwarded were sufficient to bring the loan current. Fourth, counsel reported to LPS that they had only received $1,846.84, a fact LPS neglected to forward to Option One. As a result of this knowledge, LPS should have known that a payment was unaccounted for between Option One and Boles. An inquiry to either might have brought the problem to light. Instead, LPS ignored the facts.

Ms. Goebel presented another opportunity for LPS to get it right. If she had reviewed the file and familiarized herself with the communications between the parties, she might have also noticed that the December payment was forwarded to Boles, but evidently not received. She certainly would have noted the receipt of an additional payment by Boles but not posted and the inconsistency in due dates contained in the Second Motion and affidavit. However, Ms. Goebel was trained to rotely check three (3) finite pieces of information. She candidly admitted that even if she had known of the unposted payments, she would have signed the affidavit without questioning its content because it was counsel’s.[103]

Of course, the affidavit is anything but counsel’s. It is the sworn statement of the loan’s status by the holder of the note. It is evident that LPS blindly relied on counsel to account for the loan and all material representations. In short, the affidavit was nothing other than a farce and hardly the evidence required to support relief. The facts supporting a default are the lender’s to prove, not counsel’s. In this case the lender and LPS cloaked Ms. Goebel with a title that implied knowledge and gravity. LPS could have identified Ms. Goebel as a document execution clerk but it didn’t. The reason is evident, LPS wanted to perpetrate the illusion that she was both Option One’s employee and a person with personal and detailed knowledge of the loan. Neither was the case.

III. Conclusion

The fraud perpetrated on the Court, Debtors, and trustee would be shocking if this Court had less experience concerning the conduct of mortgage servicers. One too many times, this Court has been witness to the shoddy practices and sloppy accountings of the mortgage service industry. With each revelation, one hopes that the bottom of the barrel has been reached and that the industry will self correct. Sadly, this does not appear to be reality. This case is one example of why their conduct comes at a high cost to the system and debtors.

The hearing on the Motion for Sanctions provides yet another piece to in the puzzle of loan administration. In Jones v. Wells Fargo,[104] this Court discovered that a highly automated software package owned by LPS and identified as MSP administered loans for servicers and note holders but was programed to apply payments contrary to the terms of the notes and mortgages. In In re Stewart,[105] additional information was acquired regarding postpetition administration under the same program, revealing errors in the methodology for fees and costs posted to a debtor’s account. In re Fitch,[106] delved into the administration of escrow accounts for insurance and taxes. In this case, the process utilized for default affidavits has been examined. Although it has been four (4) years since Jones, serious problems persist in mortgage loan administration. But for the dogged determination of the UST’s office and debtors’ counsel, these issues would not come to light and countless debtors would suffer. For their efforts this Court is indebted.

For the reasons assigned above, the Motion for Sanctions is granted as to liability of LPS. The Court will conduct an evidentiary hearing on sanctions to be imposed.

[1] P-219.

[2] P-13.

[3] P-15.

[4] P-17.

[5] P-18. Pursuant to the local procedures of the Court, Motions for Relief must be accompanied by an affidavit of default by the mover attesting to the facts relevant to the motion and supporting the relief requested. The affidavit is taken into evidence in lieu of testimony if the matter is otherwise uncontested and if the court determines that it establishes a basis for granting relief.

[6] P-20.

[7] P-24.

[8] P-25.

[9] P-28.

[10] P-30.

[11] Id.

[12] 6/26/08 TT 25:15-30:25.

[13] 6/26/08 TT 31:22-32:23.

[14] P-46.

[15] Id.

[16] Id.

[17] P-45.

[18] P-43. On July 11, 2008, the Court entered an additional Order to Show Cause against LPS directing its presence to explain its calculation of the amounts due on the Wilson loan. P-45.

[58] On October 27, 2010, this Court approved a Stipulation between the UST and Boles. P-275.

[59] P-219.

[60] 8/21/08 TT 234:5-10; 18-20.

[61] P-7.

[62] Exh 5, nos. 353, 349.

[63] LPS did not manually adjust Debtors’ account for the October 2007 payment until February 2008. Exh. 5, no. 265. As a result, Debtors’ account showed past due for October until the adjustment was made.

[64] Exh. 5, no. 311. The referral of a file to counsel in actuality opens an internal monitoring process for a requested action or “issue.” The referral is sent via internal transmission, similar to email. When the Boles firm opens the request, the computer notes the receipt of the referral by date and time, i.e. Exh. 5, no. 306. The issue will remain open until the task is completed at which time the computer will note the time and date of completion and close the request. Through the use of the “issue” process, those managing a file can see the status of a task and its anticipated date of completion.

[65] P-15.

[66] Exh 5, no.305. The payment was intended to satisfy Debtors’ December installment. It was dated December 27 and received by Option One on January 2.

[71] The funds were received and counsel was notified of receipt four (4) days prior to the filing of the First Motion. While the First Motion was pending, Debtors forwarded and counsel was notified of an additional $1,858.84 in payments.

[72] Exh. 5, no. 270.

[73] Exh. 5, no.253.

[74] February’s installment was due on the 1st of the month and past due on the 15th.

[75] Exh.5, no.234. Evidently, the payment acknowledged by Option One on January 3, 2007, for $1,546.68 was not forwarded to Boles as requested. See, Exh. 5 no. 305, 301, 299. If it had been, Boles would have had both the December and January installments in its possession making the loan only due for February. As it was, the one (1) payment held by Boles brought Debtors within 45 days of current. It should also be noted that Debtors were not only making payments on a monthly basis, but were also forwarding payment of late charges with each installment.

“[A] forged deed is a nullity and vests no title in a grantee. [Cit.] As such, even a bona fide purchaser for value without notice of a forgery cannot acquire good title from a grantee in a forged deed, or those holding under such a grantee, because the grantee has no title to convey.”Brock v. Yale Mortgage Co

AURORA LOAN SERVICES, LLC
v.
JOHN MACELRAY VEATCH, ADMR., et al.

S10A1725.

Supreme Court of Georgia.

Decided: March 18, 2011.

HINES, Justice.

In this quiet title action, the trial court entered a final order ruling that fee simple title to the subject property was vested in John Macrelay Veatch (“Veatch”), as personal representative of the estate of Raymond Wesley Veatch, Jr., unencumbered by the security deed held by Aurora Loan Services, LLC (“Aurora”), and striking various deeds from the deed records of Fulton County. Aurora appeals, and for the reasons that follow, we affirm.

Elsie Veatch owned the subject property until her death in 1974; her sole heir was Raymond Wesley Veatch, Jr., Veatch’s father, who died on March 20, 2006. After his death, two forged deeds were recorded in the Fulton County deed records, purporting to convey title to the property to Antonio Simpson. One forged deed was styled “Quitclaim Deed,” purportedly executed on May 19, 2006 by Elsie Veatch, who had then been dead for 32 years; this purported deed was recorded on October 17, 2006. The other purported deed was styled “Executors Deed,” and was purportedly executed by Raymond Wesley Veatch, Jr., on March 15, 2006, a date on which he lay in a coma; it was recorded on November 6, 2006. After these forged deeds were executed and recorded, a warranty deed purportedly from Antonio Simpson to Darryl Matthews was recorded on November 8, 2006. Matthews then executed a security deed in favor of First Magnus Financial Corporation in connection with a loan for $187,500. The security deed was eventually assigned to Aurora.

On September 5, 2007, after Veatch discovered activity on the property and applied for, and was granted, letters of administration of the estate of Raymond Wesley Veatch, Jr., he filed in the Fulton County land records an affidavit stating that the Executor’s and Quitclaim deeds were false. He then filed in the superior court the present petition to quiet title. OCGA § 23-3-40 et seq. The trial court appointed a Special Master who concluded that Aurora was a bona fide purchaser for value. See Roop Grocery Co. v. Gentry, 195 Ga. 736, 745 (1) (25 SE2d 705) (1943). However, the trial court disagreed, finding that there was record notice that the forged deeds were fraudulent, and that in any event, a forged deed is a nullity and cannot convey title.

The trial court is correct. Aurora’s interest in the property is dependent upon the forged deeds made to Antonio Simpson. As the trial court noted, such a deed cannot convey title. “[A] forged deed is a nullity and vests no title in a grantee. [Cit.] As such, even a bona fide purchaser for value without notice of a forgery cannot acquire good title from a grantee in a forged deed, or those holding under such a grantee, because the grantee has no title to convey.” Brock v. Yale Mortgage Co., 287 Ga. 849, 852 (2) (700 SE2d 583) (2010). In that opinion, this Court specifically overruled prior precedent of this Court that extended “the bona fide purchaser for value doctrine to those acquiring title under a grantee in a forged deed.” Id. at 853 (2). Accordingly, it is of no moment whether the deed records provided notice of the forgeries at the time Matthews executed the security deed on which Aurora bases its claim; there was simply no title held by Simpson, Matthews, First Magnus Financial Corporation, or any subsequent assignee. Id. Accord, Second Refuge Church &c. v. Lollar, 282 Ga. 721, 726-727 (3) (550 SE2d 128) (2007). The trial court did not err in declaring title to be vested in Veatch, as personal representative of the estate of Raymond Wesley Veatch, Jr., unencumbered by the security deed held by Aurora.

Excerpt:

IV. CONCLUSION

The Court concludes that Wells Fargo violated TILA and the Sousas were therefore entitled to rescind the Transaction in July 2007. As a result of the violation and the rescission, Wells Fargo’s proof of claim is disallowed and the Sousas are entitled to damages. The Sousas are required to tender to Wells Fargo the actual money lent to them less any finance charges and payments they made to Wells Fargo on the loan. Accordingly, the Court shall grant Claim 1, deny Claim 2, deny as moot Claim 3, grant Claim 4, and grant Claim 5. Furthermore, the Court will grant Count I and Count II of Wells Fargo’s cross-claim against the Ginn Firm. This opinion constitutes the Court’s findings of fact and conclusions of law in accordance with Federal Rule of Bankruptcy Procedure 7052. The Court will issue a separate order and judgment consistent with this opinion.

It’s a Louisiana bankruptcy case involving a single foreclosure that best illustrates the problems with the banks’ outsourcing their mortgage default work to LPS or similar entities. During a bankruptcy, foreclosure is forbidden without the judge’s permission, so LPS is frequently involved in seeking that permission.

In that Lousiana case, involving the bankruptcy of Ron and La Rhonda Wilson, LPS is facing sanctions for allegedly committing perjury during a hearing held to find out why the bank — Option One — twice asked the bankruptcy court for permission to foreclose when the debtors were current on their mortgage. LPS insists it did not intend to mislead the court.

UNITED STATES TRUSTEE’S POST-TRIAL BRIEF IN LIEU OF CLOSING
ARGUMENT

TO THE HONORABLE ELIZABETH W. MAGNER:

Henry G. Hobbs, Jr., the Acting United States Trustee for Region 5 (“United States Trustee”), files this brief in lieu of closing argument, per the Court’s directive at the conclusion of evidence on December 1, 2010. This brief, and the December 1, 2010 trial, relate to the May 21, 2010 Motion for Sanctions filed by the United States Trustee (“Motion”). The Motion seeks sanctions against the respondent, Lender Processing Services, Inc., f/k/a Fidelity National Information Services, Inc. (“Fidelity”), pursuant to the Court’s inherent power to sanction bad faith conduct and under 11 U.S.C. § 105(a) to prevent an abuse of process.

I. SUMMARY OF ARGUMENT

Fidelity permitted its officer, Dory Goebel, to give materially misleading testimony to the Court on August 21, 2008, and should be sanctioned. It is undisputed that important parts of Goebel’s testimony were untrue; the crux of the matter now is determining Fidelity’s level of culpability. The evidence proves that, at a minimum, Fidelity acted with indifference to the truth in permitting Goebel to give the misleading testimony. The United States Trustee has met his burden of proof, which is a mere preponderance of the evidence. The sanctions available to this Court, through its inherent authority and 11 U.S.C. § 105 (a), range from financial sanctions to injunctive relief.

2 Q Sure. Are there any attorneys who are not
3 members of the Fidelity — or the LPS attorney network
4 who can access your Process Management system?
5 A Not that I’m aware of.
6 Q And is it a fact that the only attorneys who
7 are using Process Management are attorneys who have
8 signed a referral agreement with LPS?
9 A That would be correct.
10 Q So, while your clients are free to choose
11 whomever as a foreclosing attorney, if they are an MSP
12 user and they are an LPS — they have an LPS agreement
13 with you for Default Solutions, the only attorneys
14 available on LPS system are attorneys who have signed
15 a contract with LPS?
16 A That have signed a contract with LPS, yes.

<SNIP>

3 Q So I just want to be sure. What you’re
4 testifying to is that there is no compensation ever
5 paid by the servicer to LPS Default Solutions for all
6 this work that it does on behalf of the servicer with
7 respect to the foreclosure?
8 A No.
9 Q There is compensation or there is not
10 compensation?
11 A No, there’s no compensation.
12 Q Is it your testimony then that the only fees
13 which LPS Default Solutions collects with respect to
14 the foreclosure of any given loan is the
15 administrative support fee charged to the network
16 attorneys?
17 A Yes.
18 Q And the division of LPS Default Solutions
19 which we are here about today and which you are
20 testifying as a 30(b)(6) representative, the only
21 source of income it derives for its work with respect
22 to foreclosure is the administrative support fee?
23 A That’s my understanding.